The new Trusts Act 2019 comes into force on 30 January 2021 and are expected to result in a reduction in the number of Trusts in New Zealand. Many of the changes are aimed at making trust law more accessible to both lawyers and the public, strengthening the ability of beneficiaries to hold trustees to account. Broadly the new rules for every Trustee to abide by are;
- Know and act in accordance with the terms of the Trust – to invest prudently, not act in their own interests, act unanimously, not profit from the Trusteeship.
- Retain a copy of the Trust Deed and any variations.
- Basic trust information must be made available to beneficiaries – i.e. they should be told that they are a beneficiary and told about any future changes to the Trusts terms or Trustees.
The rules may appear onerous and perhaps too open to beneficiaries who may not currently know about the Trust, but they should be seen as routine and essential to good trust administration. If you have a Trust, your lawyers should be reviewing yours and ensuring the new requirements, when they come in, are adhered to if they are involved in its administration. Even the simplest Trusts holding only a family property should be documenting Trustee meetings and resolutions annually. We can help do this for you if you wish. As far as financial information is concerned all Trusts should, as a minimum, keep a record of their assets and liabilities. Whilst it might be felt that full financial statements for the simple Trust is not necessary, it is possible that the assets and liabilities might not be known without full financial statements being prepared. We can advise on whether financial statements should be prepared for your Trust.
We still believe that Trusts are beneficial from the point of view of protecting assets but they will undoubtedly require more frequent attention in future.
You may have noticed that since lockdown contacting IRD has become even harder. They have cut down their operating hours significantly. Our accounting body has informed us that they are actually only taking calls from 8.30 – 12pm during the week. They are probably under some pressure with COVID affecting so many taxpayers, who are needing extra help and the IRD were already understaffed. They are encouraging people to contact them through secure mail via MyIR accounts so it might be wise to contact them by this method in the first instance, although there is often a few weeks delay before they will get back to you. Please also bear in mind that it is no easier for us to contact them so if we contact the IRD on your behalf it will also take us some time to get a reply.
Small Business Cashflow Loan Scheme
The Small Business Cashflow Loan Scheme deadline has been pushed out further, to 31 December 2020. If you wish to apply for this $10,000 loan (plus $1,800 for each equivalent full-time employee – based on your COVID-19 Wage Subsidy grant received) there is still an opportunity to do so. The application needs to be made through your MyIR account.
AML and Other Compliance Costs
In the last few years our compliance costs have increased substantially with the advent of the Anti-Money Laundering (AML) Act, problems contacting IRD (as mentioned above) and the requirement to provide more detailed workpapers and paper trail of our work. You may have noticed that we are now required to request and collate additional information from our clients. Additionally, we now have to have AML Audits, do ‘Politically Exposed Person’ checks (related to AML requirements) for all clients and have a Practice Review every few years by our accountancy body (ATAINZ). All of these things unfortunately increase our overheads and the time it takes to prepare a set of accounts.